Bitcoin Donations in Germany: Holding Period Key to Tax Deduction

Donating Bitcoin to a charitable organization can be tax-deductible in Germany, but the amount of the deduction depends on the holding period of the asset.

According to the German Income Tax Act, if the holding period has elapsed, the full market value of the Bitcoin is deductible as a donation in kind.

However, if the holding period is still running, the deduction is capped at the carried-forward acquisition cost, which is the original purchase price of the Bitcoin.

This means that if you donated Bitcoin after just eight months of holding it, the deduction would be limited to the original purchase price, even if the market value has quadrupled.

This rule is specified in section 10b paragraph 3 of the German Income Tax Act.

It's worth noting that donating Bitcoin after a sale is not the cleanest route for tax, as it can trigger a taxable gain and a separate donation.

Only transfers to tax-privileged organizations, such as legal persons under public law and public bodies, are deductible.

The recipient must be recognized as charitable and issue a confirmation of the donation, which includes the value of the item donated.